## Friday, July 11, 2008

### True Monetary Price of Government

I decided to estimate how much the government actually costs. When you buy something at the store, how much of that price actually goes into making the thing and how much is actually going towards taxes?

I'm going to start the analysis by imagining a simple tax-free economy.

You have a busted tooth, so you go to the dentist for a filling, which costs (for simplicity) \$100. Since I have no hard percentages, I'm going to assume that filling cost \$50 and the dentist's time cost \$50. The filling was bought from the filling company, FillCo, which likewise spent \$25 on labour and \$25 on materials, which they bought from a rock-picking-up company, RockPick, which spent all \$25 on labour. (RockPick literally picks up rocks, breaks them, and hands the innards to FillCo to refine into fillings.)

For simplicity I'm also rolling profit into labour. Now, let's add government, specifically Canadian government, and find out how much you have to pay for your filling.

First, income taxes on average are about 30%. Now, when Canada imposes this tax on RockPick, RockPick cannot let the workers bear the burden; RockPick must pay a fair market wage or else lose their labour. Thus, this full 30% will be bourne by FillCo. To pay their labour net \$25 they must spend 30/70*25 extra, total \$35.71.

Additionally, FillCo must now pay sales tax, which is currently 13% in Ontario. FillCo is now paying \$40.35 for materials. Also, they must pay their own labour the 30/70 extra. The total cost to FillCo is now \$76.07.

The dentist also will not let themselves net less than they are worth, and charges 30/70 extra for their labour. The materials after sales tax are \$85.96. The labour is now \$71.42.

Your filling, after sales tax, now costs \$177.85. You must also remember that to pay this you have to earn \$254.07, because 30% will be taken before you can spend it on actual wealth.

In even this simple economy, you're only allowed to spend 2/5 of every dollar you earn. Every layer - such as transport, further refinement, wholesale, and so on - reduces this ratio still further.

The government appropriates nearly all of every dollar before it can be spent on the actual creation of wealth.

Of course, the government does eventually spend this dollar somewhere else, but due to the well-known epic inefficiency of government, most of it will be wasted or, such as in the case of war, actually be counter-productive. In any case, you certainly won't see any of it. (A whole lot of it will be seen by African warlords, people like Robert Mugabe, Burmese Juntas, and Pakistani terrorist groups. Oh, sorry, I meant "revolutionary groups." I'm sure the families of their victims find this distinction very important.)

Despite this ridiculous level of taxation, no government on Earth has a balanced budget or a debt that can be described without hyperbole.

This is also the real reason for anti-trust laws. The government realizes that businesses that vertically integrate can save ridiculous amounts by avoiding sales taxes.

Just in case this isn't enough to prove that government is a scam, I'm going to mention how Canada does social insurance. It's a 4.75% tax on your income and a 4.75% tax that your employer has to pay. In other words it's a flat 9.5% tax on your income of which you're only told of half. (It's also bandpass, which is why I haven't included it in my simple calculation.) To receive a full pension, you must work for at least ten years and apply at age 65.

Which is calculated at 25% of whatever you were paying. In other words the only way to even break even is to work for only ten years, 55-65, and then survive, taking a pension, to age 105.

Incidentally, social security is bankrupt. There will shortly be no funds to pay the pension.

Another day, another reason to be an anarchist.

When someone complains, "But how will we build roads without the Government? Who will pay for healthcare without the government?" the answer is simple: "You will. You'll be two and a half times richer, at least."

Better Explained
gave me an excellent way to visualize this change. The average car costs about \$20 000. If you were 2.5 times richer, it would cost 2.5 as much, or \$8000. This applies to everything. Gas has special excise taxes, so in Canada it would currently be about 40 cents and in the states probably less than a dollar.

Now, how will you pay for healthcare? My real question is, "Will you even bother going to work all five days a week?"

Of course, you will actually be much richer than this. There would be no inflation without government. The state's philosopher's stone costs an additional 10% per year, bumping that figure for the filling up to approximately \$280. Tariffs, licensing, property taxes, inefficient and useless laws, the social insurance I mentioned above, and several other factors all contribute to this number as well.

"Who will care for the poor?"
"There's this new thing, I don't know if you've heard of it...called charity. I hear it can potentially help poor people. Will you be giving some of your extra paycheque-and-a-half to this new charity stuff?"